I’ve been told I must sub-let a property from a franchisor. Will the franchisor add any money onto it?

Shelley Nadler writes: Often the franchisor will be able to negotiate very good terms for leasing a site because of the value of the covenant it is able to offer the landlord.  Some franchisors may have not originally intended to become involved in the ownership of premises, but have found that owing to pressure from landlords they must become involved in order to secure the best locations.  The franchisor may decide that where it takes a lease of premises and sub-lets to its franchisees it charges a higher rent to the franchisee, thereby earning a rental profit for itself. Some franchisors add on a fixed sum or certain percentage of the annual rent payable to cover their costs in administering the sub-leases.  These costs can include the administration of rent collection, surveyors costs, the cost of inspections to ensure the lease is not being breached, a rental insurance policy and to compensate the franchisor for its ongoing liability in having to be involved in the leasing arrangement. Taking a lease of premises is not without risk and you should always consult a solicitor before committing yourself.

Shelley Nadler is a legal director at Bird & Bird’s international franchising team and has many years of experience advising on all aspects of franchising.